FINANCIAL PROCESS INNOVATIONS AND FINANCIAL PERFORMANCE OF MICROFINANCE INSTITUTIONS IN MOMBASA COUNTY, KENYA
Abstract
The purpose of the study was to investigate the financial process innovations on financial performance of microfinance institutions in Mombasa County. This study used descriptive cross-sectional design. The study unit of observation was all MFIs both deposit and non-deposit taking MFIs in Mombasa County. The study unit of analysis was the management employees of the 15 Microfinance institutions in Mombasa. Purposive sampling technique was used to select a sample size of 89 participants by help of Yamane statistical formula. Primary data was collected using structured questionnaire based on the objectives of the study. The collected data was edited, coded for processing using the Statistical Package for Social Sciences (SPSS v.25) and results were presented in frequency tables. Descriptive and inferential statistics were used to analyze information generated from the respondents. The study established that the Micro finance institutions have enabled remote access to loan origination platform through automation. This implied that clients can originate loan autonomously without visiting the MFIs premises. This has contributed to an increase in remote account openings and loan applications. The study concluded that automated loan origination has reduced the turnaround time for loan approval in the MFI and that the frequency of transactions through the MFI has increased. The study concluded that MFI has taken measures to encrypt credit cards with cutting-edge technologies thus rendering them secure. The study concluded that credit cards are attractive to retail MFIs because they typically provide higher risk-adjusted returns than other types of loans. However, the MFIs do not offer incentives to motivate customers to switch to digital cards usage. The study recommended that management of MFIs should install point of sale terminals in all area with high population and shopping centers so as to enable wider accessibility of MFIs services. The point of sale terminal should be well guarded through round the clock security so as to minimize chances of the terminal tempering resulting in theft of customer’s money. The management of MFIs should ensure that the point of sale terminals are available as and when needed and additionally the MFI should enable 2-factor authentication in all point of sale terminal transactions so as to protect the client’s money.
Key Words: Remote Data Processing, Digital Cards, Back Office Automation, Point of Sale Terminals
CITATION: Dawood, F. A., & Ibrahim, A. A. (2023). Financial process innovations and financial performance of microfinance institutions in Mombasa County, Kenya. The Strategic Journal of Business & Change Management, 10 (2), 562–581.
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DOI: http://dx.doi.org/10.61426/sjbcm.v10i2.2623
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